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Impacted by a cyberattack, loanDepot delivers a Q1 loss of $38M

loanDepot delivered another financial loss in the first quarter of 2024, during which the mortgage lender dealt with the impacts of a cyberattack that brought down its systems.  

The California-based lender recorded a non-GAAP adjusted net loss of $38 million from January to March, compared to a $26.6 million loss in the previous quarter and a $59 million loss in the same period in 2023. By GAAP accounting standards, the net loss in Q1 2024 was $71.5 million, per filings with the Securities and Exchange Commission (SEC) on Tuesday. 

President and CEO Frank Martell said in a call with analysts that the company restored operations relatively quickly after the cyber incident, but the attack resulted in lost revenue and additional expenses. The company, he added, does not “expect further disruptions in our operations stemming from this incident.” 

In the first quarter, loanDepot’s expenses were $307.9 million, up 1.7% quarter over quarter but down 2% year over year. The cyber incident caused $15 million in additional expenses, restructuring and impairment charges added $3.9 million, and accrued legal expenses were $1.1 million during the period. 

Chief financial officer David Hayes said that during the first quarter, the company continued to focus on profitability growth and cost reduction, achieving 93% of its $120 million supplemental productivity program through April.  

“​​Our volume-related expenses, consisting of commissions and direct origination expenses, increased by $2 million from the year-ago quarter, despite low origination volumes,” Hayes told analysts. “Part of the cyber-related costs incurred during the quarter were to support our loan officers by compensating them for lost commission.”

Meanwhile, the company’s net revenues reached $222.7 million, a decline of 2.5% compared to the previous quarter but an increase of 7.6% compared to Q1 2023. Revenues could have be higher since loanDepot estimates a loss of $22 million in business opportunities when its systems were down due to the cyber incident. 

But hackers are not the only factor that impacted loanDepot’s operations. Regarding the macro landscape, mortgage rates are expected to be higher for longer, affecting all lenders. In this context, Martell said loanDepot will continue investing in revenue-generating opportunities. 

“Although it is likely that market conditions will remain challenging, we believe that maximizing profitable revenue growth opportunities and operating leverage benefits will support our march towards our objective of achieving profitability,” Martell said in a statement. 

The company reported a cash balance of $604 million at the end of the quarter. Operationally, loanDepot’s origination volume was at $4.6 billion from January to March, down from $5.3 billion in the previous quarter and below the $4.9 billion figure in Q1 2023.

Its pull-through gain-on-sale margin was 2.74% in Q1 2024, compared to 2.96% in Q4 2023 and 2.26% in Q1 2023. 

“The increase in margins [year over year] was due in large part to our focus on serving first-time homebuyers, which resulted in a higher mix of profitable FHA and VA loans. We also benefited from our relentless focus on loan quality, which resulted in lower repurchase reserves,” Martell said. 

Purchase loans comprised 71% of loanDepot’s total volume in Q1 2024. Meanwhile, the company’s organic refinance consumer direct recapture rate was 59% from January to March, down from 67% in the same quarter of 2023.   

Company executives project a second-quarter 2024 origination volume of $5 billion to $7 billion. The pull-through gain-on-sale margin is expected to be between 2.6% and 2.9%.  

The unpaid principal balance (UPB) in loanDepot’s servicing portfolio decreased to $142 billion as of March 31, down from $145 billion as of Dec. 31. Servicing fee income declined to $124 billion in Q1 2024, compared to $132.4 million in the previous quarter.

“During the quarter, we opportunistically monetized a portion of our portfolio by selling Ginnie Mae MSRs totaling $3 billion in UPB,” Hayes said. 

LDI Mortgage president Jeff Walsh noted that the company always monitors the MSR market and will “opportunistically transact where it makes sense.” After the earnings release, loanDepot stock was trading at $2.28, up 1.75% in the after market. 

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